New legal notes from music biz’s Pied Piper

Legal eagle Passman updates tome

In the eighth edition of his “All You Need to Know About the Music Business,” due Dec. 4 from Simon & Schuster’s Free Press imprint, attorney Donald S. Passman continues his unlikely quest to demystify music law for the industry layman.

Passman’s book has gained a following among entry-level musicians by eschewing impenetrable thickets of baffling legalese.

“I had to write a book mostly for people who don’t like to read,” says Passman, a top barrister at the Los Angeles firm of Gang, Tyre, Ramer & Brown. “And one of the things that always came easily to me in life was that if I understood something that was complicated, I could usually make it pretty simple. It’s not written for lawyers, so all of the jargon and minutiae, while it’s in there somewhat subtly, had to play second fiddle to understanding the basic concepts and telling people how you get started in the business.”

As before, “All You Need to Know” employs a conversational yet no-nonsense tone and sometimes homely metaphors that boil complex issues down to their essence. For instance, Passman illustrates the potentially daunting concept of “phony free goods” by recalling his career as a 10-year-old lemonade stand operator.

“The trick was, if you buy one drink, you get one for free, but I doubled the price!” Passman says. “Strangely, that did actually work. That’s essentially what the record companies did (with free goods). It occurred to me when I was trying to think about an easy way to explain it that I had done the same thing.’ “

The first edition of “All You Need to Know” grew from an outline for a class he taught at USC in 1991. Since then, it has sold more than 300,000 copies, all the while keeping pace with the lightning developments in the biz through seven successive revisions. Passman’s book was not the first nuts-and-bolts tome about the business — the perennial “This Business of Music,” now in its 10th edition, dates back to 1964.

Since 2000, the music industry’s peak year for CD sales, and the beginning of its agonizing sales decline, Passman has revised his book four times, once every three years. Many of the changes have been due to the precipitous decline of the CD format and the development of new technologies, from digital downloads to streaming.

The book has always acknowledged the potential for dynamic changes in business, and consequently in business law, as a result of innovation: The prescient “Passman Theory of Technology Cycles” — stating that royalty payments only slowly catch up with tech developments — dates back to the 1991 first edition, when the CD format was still relatively young commercially.

“New technologies start out being very expensive and experimental, and nobody knows what to do with them or what to pay for them,” Passman says. “So they come to some kind of resolution, but always when (the technologies) become mainstream. Not even necessarily out of malice, but out of the idea that an expensive new technology, when it becomes mainstream, becomes cheaper. … The economics change.”

One relatively new model that continued to develop, even as the latest edition of Passman’s book went to press, was streaming music services.

“I think streaming will become a major, if not the major, part of the business in the future,” Passman says. “(But) getting people to pay for it is much more of a challenge, because the advertising part of it hasn’t generated anywhere near the kind of money that’s been lost on the other side of it, although it’s starting to. YouTube has started to pay much more significant money; I don’t think Spotify is paying serious money yet. I think over time it will grow, and it’s a question of whether people will adapt to streaming music the way they’ve adapted to cable television. Nobody thinks twice about paying their cable TV bill.”

One piece of technology-driven advice offered in just the past two editions of “All You Need to Know” probably couldn’t have been foreseen, even by its author, until recently: An artist today may not really need a record label.

Passman points out that in 2000, when the fourth edition of his book came out, “everybody wanted a record deal. That was the brass ring that everybody rode the merry-go-round trying to grab. Nowadays, it’s a real question, depending on who you are and what you want to do. For a mainstream pop artist or any kind of artist who wants a worldwide, massive push, nobody’s yet been able to do it without a record company. I guarantee you it will happen at some point in the future, but it hasn’t yet. For a niche artist, it’s a much harder question, because even if you don’t do as well without a company, you may end up making more money, and certainly there’s a lot to be said for controlling your life and your fate.”

While virtually anyone can learn something about an obscure cranny of the industry by reading “All You Need to Know About the Music Business,” Passman continues to focus on the readers who need the book most: Musical neophytes who could easily become victims of a cutthroat industry if they enter the arena unarmed.

“The biggest problem that people get into when they’re young is, they sign deals that tie them up for a long time without any guarantee of success or any way out if things are a disaster,” Passman says. “That can be with a manager or a record label or a publisher. … They naively go into these deals and either don’t have representation or are so desperate that they just do it. Most of the time you can protect yourself with some relatively simple things. That’s probably the biggest place that people get screwed, but the labels are always trying to figure out new ways to do it.”